When Budgets Get Cut – Essential Tips to Navigate Around the Chaos

by | Aug 11, 2017

Knowing how to efficiently build a marketing budget is a vital skill of a sr. level marketer in any organization, although that process can differ significantly depending on the individual. For some, it can be less academic and may mean simply adding 10% to last years’ number. While for others, the approach may be more detailed and could mean defining the investment requirements by channel, business unit, market, the list can go on and on.

Despite a seemingly strong global economy, the reality for many marketers is that they will find themselves with a flatline or retraction in marketing budgets. The process of evaluating a budget, when you are asked to do more with either the same or less, is a little more complex and may seem like a monumental ask.

No matter which end of the spectrum you sit on, knowing how to navigate those waters will be critical. Naturally, a flood of questions will inevitably come to mind when the topic comes up…

  • Which business priority should I promote or cut from the marketing team’s agenda?
  • Will head count be impacted?
  • Should I consolidate my agencies to save on fees?
  • Could I cut the unknown tactics and go with something I “know” will perform?
  • Should I internalize any external efforts?
  • Can my internal team handle more?
  • Can my internal team do the job?
  • Are there any redundant investments where I can save?

Beyond these questions (and many more you will have to ask yourself and prepare to be asked) it’s important to keep grounded in achieving the most you possibly can from your marketing investment.

A few tips to help you along the way.

Justify the Investment – Borrowing a concept from finance, using a “zero-based budgeting” approach will allow you to build your budgets from the ground up. The notion of ZBB is focused on justifying each line item, indicating what it will provide in terms of performance and how that will contribute to the global KPI’s you have either established or agreed to tackle for your organization.

This approach allows for closer scrutiny on investments and helps your internal team truly justify the investment is terms of whether it is delivering a value-add return to the organization. We also like this approach as it challenges a marketing team to not think in terms of “it was there last year and we used it” or “the cost grows by 3% yearly” but to again, defend the very existence of every dollar invested.

Applying a comparative approach on a line item basis can also help your department or organization make a meaningful effort to reduce investment but maintain (as much as possible) the performance output from the marketing team. This comparison can also raise questions- some that may challenge past decisions- so understanding historical goal(s) is key.

Agency Support – Often misalignment between organizations and their agency or agencies can exist. As a marketing leader, it’s important to have a global understanding of the full capabilities of your agency partner(s) and how those can either support or replace internal resources or even if internal resources can replace external support.

Granted this evaluation also requires some close attention to the costs and value of the expertise, especially in a fluid ecosystem. With fast-paced technological advancements in marketing and advertising technology, the skill sets of yesterday may not help you achieve your objectives tomorrow.  It is important to have a realistic view of your talent needs.

Ensuring that any changes that are made do not further expose you will be key, which could entail in-sourcing or consolidation. What may seem like a great decision can be an issue once your team or a new agency starts to roll up their sleeves.

MarTech Investments – Over the past number of years, the investment into internal marketing technology has exploded with martech now chewing up 25%-35% of most CMO’s budgets.

Taking stock of every piece of technology you are investing in and again, applying a ZBB approach is the smartest way to go. You’ll likely find that you have redundant capabilities and likely some of the investments are being used very sporadically or not at all by yourself or your broader team.

If governance doesn’t exist around your martech investments, it may make sense to think about installing a policy. Keep what delivers real value, kill what delivers perceived value and absolutely kill what isn’t used.

For most organizations, you’ll be shocked at what you find once you start to take stock here.

Re-Evaluate the Measurement Gates – Knowing where you stand will become critical as you proceed. Taking a moment to evaluate the measurement gates will be vital if this is overlooked you could be left to answer some very difficult questions.

Let’s also face the reality, some KPI’s are easier to achieve than others. For example, if your objective is market share gains in an industry where investment is high, this will impact your budget more than share maintenance in a less competitive environment. So, adopting a “no surprises” attitude internally will help you communicate the impact across the organization. This will enable you to know when to raise the red flag internally to the organization if share begins to slip.

Expectations – Set them and over communicate.

Doing this in a professional and realistic way will be a critical step. Thinking of things such as divisional priorities, investment requirements, channel goals, quarterly performance, headcount implications, etc. is important to ensure you have not overlooked critical factors to the process.  This is a moment of extra due diligence and will provide a great deal of detail to stakeholders who will be depending on you to meet their objectives. If you believe someone will be critically impacted, it’s important to communicate to them directly to again, prevent a moment of surprise as they may be directly impacted.

These tips can be helpful during your budgeting process, and if managed well, may uncover some very positive themes that will inform your strategy and tactics going forward.

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